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Unemployment Frictional unemployment Frictionally unemployed area temporarily without Individuals who are ___________________ a job. Also called ______ search unemployment, frictionally unemployed workers are “__________” In-between jobs or “searching” for their ______ first jobs. These unemployed workers have marketable (salable) skills, and it is just a matter of time before they will find a job. This type of unemployment is somewhat desirable in an economy because it economic freedom of workers to change jobs to reflects the _________________ improve their job status. always be Frictional unemployment is also inevitable. There will ________ people looking for work or changing jobs. During frictional equals the number of unemployment, the number of job seekers ________ jobs available (labor markets are in balance); they are just temporarily mismatched. Seasonal Unemployment Seasonal • __________ unemployment is a type of frictional unemployment that occurs due to seasonal changes. • Migrant farm workers, construction workers, and ___________ Life guards are workers who are often seasonally unemployed. • These individuals’ skills are marketable (in demand) only during certain times of year. Frictional unemployment T a. It is also called search unemployment because ___ people are either “in between jobs” or looking for their first jobs. F b. It is lengthy in duration ___ T c. Skills of the unemployed are marketable. ___ F d. undesirable and unlikely to happen in our economy ___ ___ T e. Jobs are available for job seekers; it is just a temporary mismatch between job seekers and the jobs available. T f. Frictional unemployment includes those who are ___ seasonally unemployed – their skills are in demand only at certain times of the year. Structural Unemployment • • • Structural ____________ unemployment occurs as a result of changes in particular industries or sectors of the economy. The demand for labor is derived from the demand for products in produced by that labor; therefore, a _______________ Decrease demand for a particular product may cause lay-offs in the industry producing the good. Foreign Structural change may also occur as a result of __________ competition in an industry. The American automotive industry and the steel industry have suffered losses in recent foreign competition. decades due to successful ____________ Certain industries may also respond to technological change in way that result in unemployment. Workers may lose their jobs due to _____________, automation such as being replaced by computers or a robot. This type of structural unemployment is sometimes called _______________ Technological unemployment. Technological Changes in Unemployment • • • • Technological change has also rendered certain products obsolete such as slide rules being replaced by ________________. calculators Workers in the slide rule industry lost their jobs while jobs opened up in the calculator industry. Unfortunately, for these structurally unemployed workers, their skills may not be directly transferable to the new jobs. To obtain marketable skills needed in the new jobs, these workers needed ________________ or further education. Retraining They might also have to relocate to a different geographic area, such as moving from the Rust _________ belt (northeast/mid-west) to theSUN _________ belt (southwest/west). Structural Employment • Structural unemployment may entail long term hardships (i.e. when a large number of workers in an industry lose their jobs it may be difficult or impossible to absorb them into other industries, even with the best of times) for the Worker __________ involved; however, structural change is inevitable in a dynamic and ____________ economy. Growing • Theoretically, during structural unemployment, the number of workers looking for jobs is equal __________ to the number of new jobs opening up; it just takes long term retraining and geographic relocation to match up workers with jobs. • Unfortunately, the match does not always occur; thus, structural unemployment entails serious __________ economic and noneconomic cost to the worker involved. Structural Unemployment T__ a. inevitable in a dynamic economy T__ b. can result from a decrease in demand for a particular product, thus causing lay –offs in the industry. F__ c. is short-term and does not entail a serious hardships for the unemployed worker. T__ d. can and does result from stiff foreign competition. T__ e. can result from technological change such as automation. T__ f. requires workers to get additional training or education and/or to relocate geographically. F__ g. is cause by the recession phase of the business cycle. F__ h. workers’ skills are directly transferable to new jobs. Cyclical Unemployment Cyclical unemployment occurs when there is a deficiency in aggregate demand in the economy. This type of unemployment is Down-turns in the associated with ____________ business cycle. During these recessions, unemployment may be widespread and _________ in duration. Lengthy Unfortunately, this type of unemployment indicates a labor market out of balance: the number of job seekers isgreater _________ than the number of jobs available. Serious Cyclical unemployment entails ___________ economic and no economic cost to society. Cyclical Unemployment F___ a. occurs when there is too much overall demand in the economy. T___ b. Occurs when there is not enough overall demand in the economy to purchase the output that is produced. T___ c. Occurs during recessions (downturns in the business cycle) T___ d. This type of unemployment is costly to society and to the individuals involved. F ___ e. During cyclical unemployment, plenty of jobs if people look for them. T___ f. During cyclical unemployment labor markets are not in balance. There are more workers seeking employment that jobs available. Full employment • Full employment in the U.S. economy does not mean that 100% of the labor force is employed. At any point in time, some individuals are inbetween jobs (frictional unemployment), just entering the labor force (frictional unemployment), or forced out of a job due to technological or other change (structural unemployment) in the industry. Inevitable in a • Because these changes are ___________ free economy and to some degree desirable, a natural rate of unemployment exists. This natural rate of unemployment consists of the amount of frictional (including seasonal) and structural (including technological) unemployment in the 4 to 6% economy, usually representing __________of the labor force. Full Employment • Full employment in the economy, therefore, means that all members of the labor force are employed except for those that are frictionally and structurally unemployed. • At the natural rate of unemployment, labor markets are theoretically in balance: job Equals jobs available. seekers _______ • Time (frictional), retraining (structural) and/or relocation (structural) are necessary to match the job seekers with the jobs available. • When the unemployment rate exceeds the 4-6% natural rate of Cyclical unemployment, __________ unemployment is occurring. The economy is at less than full employment during these ______________ Recessionary periods. • Because of a deficiency in aggregate demand, labor markets are out of balance. • Less than full employment or a rate of unemployment greater than the natural rate entails Serious economic and ____________ non economic costs to society, especially in terms of lost output. • At less than full employment, there is a gap (called the GDP gap) between the economy’s potential output and its actual output. • This shortfall (potential output- actual output) is called the GDP gap. • Economist Arthur Okun states that for 1% every _______increase in unemployment above the natural rate, there is generated a 2.5 % GDP gap. • This means that if the natural rate of unemployment is 6% and the actual rate of unemployment is 7%, 1 % of cyclical unemployment exists. • This 1% cyclical unemployment would result in a 2.5% GDP gap. When the economy is experiencing the cyclical unemployment associated with a recession, it is not fulfilling the economic goals of __________________and Full Employment Economic Growth ____________________ Multiple Choice • A worker who loses his job at a petroleum factory because consumers and business firms switch from the use of oil to the burning of coal is an example of: B, Structural Unemployment • A worker who quits one job and is taking two weeks off before starting his new job is an example of: A, Frictional Unemployment Multiple choice • Insufficient aggregate demand results in: C, Cyclical Unemployment • The full-employment unemployment rate in the economy has been achieved when: C, Cyclical Unemployment is zero • The labor force includes D, unemployed Multiple Choice • If the actual rate of unemployment is 9% and the natural rate is 6%, the GDP gap is: D, 7.5% • If the GDP gap was equal to 10% of the GDP, the actual unemployment rate would exceed the natural rate by: C, four percentage points